1887

oa Journal of Economic and Financial Sciences - Financial leverage decisions in an era of corporate earnings down-turn and financial market instability - the Nigerian experience

 

Abstract

This paper examines the impact of profitability on the financial leverage of firms operating in an unstable macroeconomic environment such as Nigeria. Using fixed and dynamic panel models, it finds consistent evidence that the profitability of a firm significantly and negatively affects its short-term debt, but not its long-term debt capital. It attributes this to the unstable nature of the Nigerian business environment and the relative inefficiency of its financial markets. It signals that Nigerian firms could be over-relying on short-term debt and external equity to fund long-term investments - a trend that is capable of increasing cost of capital to a level above any plausible limit.

Loading

Article metrics loading...

/content/jefs/4/2/EJC138226
2011-10-01
2016-12-06
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error